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Name: Gopal Krishan Section: A Enrollment No. 09BS0002792 IUD Number 0901202792 Course Title Operations Management Course Code SLOP502 Submitted on: 6th Nov, 2009 Submitted to: Sanjay Rao Topic of Assignment: Robert S. Kaplan and David P. Norton Balanced Scorecard Concept with reference to UNUM Corporation USA Student Sign Faculty Sign

Contents
Balanced Scorecard................................ ................................ ................................ ............... 3 1. 2. 3. 4. Clarifying strategies: ................................ ................................ ................................ .. 3 Communication strategic objectives: ................................ ................................ .......... 3 Planning, setting targets, and aligning strategic initiatives: ................................ ......... 4 Strategic feedback and learning: ................................ ................................ ................. 4

Strategic impact of implementing Balanced Scorecard:................................ ......................... 4 Corporate Example: ................................ ................................ ................................ .............. 5 UNUM people ................................ ................................ ................................ ...................... 5 Vision: ................................ ................................ ................................ .............................. 5 Quantifiable measure: ................................ ................................ ................................ ....... 5 Goal: ................................ ................................ ................................ ................................ . 5 Operating effectiveness ................................ ................................ ................................ ......... 6 Vision: ................................ ................................ ................................ .............................. 6 Quantifiable measure: ................................ ................................ ................................ ....... 6 Goal: ................................ ................................ ................................ ................................ . 6 Customer satisfaction ................................ ................................ ................................ ............ 6 Vision: ................................ ................................ ................................ .............................. 6 Quantifiable measure: ................................ ................................ ................................ ....... 6 Goal: ................................ ................................ ................................ ................................ . 6 Shareholder value ................................ ................................ ................................ ................. 6 Vision: ................................ ................................ ................................ .............................. 6 Quantifiable measure: ................................ ................................ ................................ ....... 6 Goal: ................................ ................................ ................................ ................................ . 6 UNUM 1998 Goals Stock Option Plan ................................ ................................ .................. 6 Operational Efficiency in UNUM: ................................ ................................ ........................ 7 Achievements of the company after implementing the Balanced Scorecard....................... 7 References: ................................ ................................ ................................ ........................... 8

Balanced Scorecard
Robert S. Kaplan and David P. Norton felt the need for a system which could help to manage the finance so that it can be put to perform better in future. They made a system of balanced scorecard in which it was laid that learning and growth are the keys to success. When the system was introduced, it was used only for the finance management and planning but later on it was realized that it can be used for management of all the functions of an organization. Soon it was in use for customers, processes management and learning. There was a chain introduced in this system which runs as it is shown in the diagram. The system of balanced scorecard takes into account 4 things which go hand in hand. The strategy is that learning and growth helps in development of better business process and which helps in efficient use of finance in return. With this the cost of production will reduce and lesser prices could be charged for the product. This will lead to customer satisfaction and that will again lead to generating more finance. With this, a chain will begin and all things being interrelated there will be overall growth of the business. Therefore we can say that Balanced Scorecard is a strategic planning system which helps in the following activities: 1. 2. 3. 4. 5. Aligning the business activities towards the goals of the organization Monitor the progress of the organization Set the targets according to the objectives Set the action plan for achieving the target Overall management of the organization by controlling

Apart from improving performance management in organization, balance scorecard can also be used to implement strategies. This is done by performing following four functions: 1. Clarifying strategies: All the strategies are mentioned very clearly and precisely. If the objectives of the employee are defined in a proper way, employees never face problem with their duties and when the work is measured in the eyes of employees and the bosses it gets done well and early. 2. Communication strategic objectives: The communication of strategic objectives is another important function given in the balanced scorecard. Unless and until the objectives are clearly communicated they will not be acted upon and the action plan will not function.

3. Pl nning, setting t rgets, nd ligning t obj ti are strategic initiati es: Aft communicated t ey have to be acted upon and an action plan has to be made. This action plan have to be ali ned in the direction of the goals that have to be achieved and this is where balanced scorecard comes into picture in a big way and helps to complete this function. 4. Strategic feedback and learning: When the work is going on, it is necessary to check and control it regularly and feedback helps to do this. Feedback also helps in knowing what are the problems faced by the employees and what can be done to remove those impediments from their way so that they can perform better. Learning helps in eliminating the problems and smoothening the functioning of the employees.

In the diagram above, the learning and growth is at the bottom of the strategic system which helps in increasing the morale of the employees and it also leads to increase in suggestions from employees. Work starts getting better automatically then and rework reduces which increases the efficiency of the business processes. At the third level, the customers get more satisfied because the cost of production reduces with attaining efficient use of resources and ultimately it leads to increase in accounts receivables. This leads to a better finance in the company and return on capital increases.

The chart below is made on a single paper so that it is easy to refer to and know the progress, to set the priorities and to plan the work accordingly. This chart acts as a monitor for employees as the dash board to the car which tells the performance. The 4 functions of balanced scorecard can be explained by using the following diagram which is an extension of the previous diagram. In this diagram we add 4 dimensions

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Strategic i pact Balanced Scorecard:

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i plementing

 

 

 

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to all the four processes namely: 1. 2. 3. 4. Objectives Measures Targets Initiatives

Each function of the process is given objectives to be achieved and the measure of it that has to be done. There is a row include in which the target for a time period is mentioned and last one is for the initiative taken.

Corporate Example:
UNUM Corporation, a company which is disability and special insurer uses balanced scorecard technique to drive its company towards the strategic vision. Company is USA based and it¶s headquarter is in Portland. Before presenting UNUM¶s balanced scorecard it is worth pointing out that, as with all the best practice companies profiled for this Report, UNUM¶s strategic goals and measures are to support a clearly defined and meaningful corporate vision. As shall be explained later, the corporation has a specific vision statement for each of its four scorecard perspectives. Now they have laid their vision to µWe will achieve leadership in our businesses.¶ The company has made three other elements beyond the main objective, y µWe will be a products-offered company¶ y µBe known for¶ y µWe will be a well-managed company¶

UNUM Balanced Scorecard
UNUM people
Vision:
o We will have the mind of a customer and the pride of an owner.

Quantifiable measure:
o A benchmark survey will integrate the company¶s employee surveys into a tool for gauging progress.

Goal:
y

Our goal is to improve annually on the score established by the benchmark survey. In addition, we will monitor our progress towards the goal on an ongoing basis through formal and informal gathering of employee opinions.

Operating effectiveness
Vision:
y

We will increase customer value by rethinking, improving and streamlining our business processes.

Quantifiable measure:
y

Operating costs will grow at no more than one-half the rate of the top line.

Goal:
y

By 1998, our total operating costs ratio will be reduced by approximately one-third.

Customer satisfaction
Vision:
y

UNUM will provide the best value in offerings matched to customers¶ needs in the markets we choose to serve.

Quantifiable measure:
y

Each UNUM area with an external customer chain will develop a customer value measurement tool. It will be aimed at determining our customers¶ assessment of the overall value of our products and services.

Goal:
y

We will continually improve our customers¶ perception of the value of UNUM¶s offerings so that the number of customers who DO NOT rate UNUM as µvery good¶ will have declined by 40 per cent when we compile our final measurement in 1998.

Shareholder value
Vision:
y

We will deliver consistently superior long-term value to UNUM shareholders.

Quantifiable measure:
y

Shareholder value will be measured in terms of total return - ie dividends plus share price appreciation. We will achieve a total return that consistently places UNUM among the top 125 companies listed on the Standard & Poor¶s 500.

Goal:
y

UNUM 1998 Goals Stoc Option Plan
Each employee of UNUM was given an option to purchase 300 shares of the company at a price of $18 per share. This helped the employees rethink about the owners of the company and made them work more efficiently.

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Operational Efficiency in UNUM:
To make the vision of the operating effectiveness perspective (µwe will increase customer value by rethinking, improving and streamlining our business processes¶) meaningful, UNUM has communicated throughout the organization an outline of how employees can contribute to attaining this goal.

UNUM was able to engage all levels of the organization in defining the goals and align the organization behind the goals. This is what the genetic strategy map defines. The employees of UNUM started putting them into the shoes of shareholders and the customers. The culture at UNUM was changed and new visions were given to the employees.

Achievements of the company after implementing the Balanced Scorecard
UNUM was able to create a work environment which supports superior business results and ultimately UNUM America has received, include being voted within the: ‡ 100 best companies to work for in America by Fortune magazine ‡ 100 best companies for working mothers by Working Mother magazine ‡ Top 30 family-friendly companies by Business Week magazine ‡ Top 50 employers by Equal Opportunity magazine

References:
1. Building and Implementing a Balanced Scorecard, case study on UNUM Corporation published by Business Intelligence 1999 2. Operations Management by Chase, Jacobs, Aquilano and Agarwal, Eleventh edition, 2006 3. Using the Balanced Scorecard as a Strategic Management System by Robert S. Kaplan and David P. Norton published by Harvard Business Reviews 4. www.balancedscorecard.org/BSCResources/aboutthebalancedscorecard 5. www.quickmba.com/accounting/mgmt/balanced-scorecard

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